January 27, 2023

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German business morale improves more than expected in December

©Reuters. FILE PHOTO: The skyline is seen through early morning fog on September 22, 2022 in Frankfurt, Germany. REUTERS/Kai Pfaffenbach

BERLIN (Reuters) – German business morale rose more-than-expected in December as Europe’s largest economy neared the end of the year with improved prospects despite the energy crisis and high inflation, a survey said on Monday.

The Ifo Institute said its business climate index rose to 88.6 from a revised reading of 86.4 in November.

A Reuters poll of analysts had pointed to a December reading of 87.4.

The indicator, which measures how companies view their current situation, also posted a stronger-than-expected rise to 94.4 in December from a revised 93.2 in November, marking a reversal after six straight declines. Analysts polled by Reuters had expected a reading of 93.5.

German companies are approaching the Christmas season full of hope, said ifo President Clemens Fuest.

In recent weeks there have been increasing signs that the German economy could avert the worst economic downturn triggered by the collapse in energy supplies from Russia following the invasion of Ukraine.

Inflation slowed slightly to 11.3% in November from a peak of 11.6% in the previous month as energy prices eased.

Meanwhile, Ifo was among economic institutes to revise upwards their forecasts for 2023, now forecasting a milder 0.3% decline next year.